A KIDNAP gang, led by a North Wales self-styled millionaire, watched two businessmen and their families for weeks before they struck, a court heard yesterday.

John Wood, 36, and David Langhorn, 40, who were snatched from Mr Wood's factory, were told the gang knew where they lived.

The two businessmen denied they were involved in a VAT scam or smuggled cigarettes.

Volker Kappler, of Llanfair TH, Conwy, who told police he was worth millions, denies two charges of kidnap and two of blackmail.

The attackers, who wore identical baseball caps and fleeces with metal badges, threatened the businessmen un l es s they were pai d &#xA3;600,000 they would kill the pair, rape Wood's wife Barbara before killing her and slit the throats of his children.

Mr Wood told a jury: "I was petrified, absolutely terrified."

He said he and Mr Langhorn were beaten up, handcuffed and driven 200 miles in the back of a van to North Wales where their captor was revealed as Kappler.

Guns were rammed against their heads and Kappler, 37, who owned a plastics firm, gave them a three-day deadline to pay &#xA3;600,000 which he claimed was owed to his supply company, Superflexibles in Rhydymwyn, by their associate Paul Thompson Kappler demanded they confirmed they had received VAT rebates of &#xA3;800,000 for their companies Asgard Ltd, owned by Mr Wood, and Formel E owned by Mr Langhorn,

Superflexibles supplied material for industrial hoses to Mr Thompson's firm VPS in Bishop Auckland, which were sold on through Asgard and Formel to a company in Dubai, in which Mr Thompson was a shareholder. The men were reported missing in March after police found Mr Wood's &#xA3;64,000 Porsche and his factory unlocked, Teeside Crown Court heard.

They were found in a field in Wirral after being dumped while still hooded and wearing tracksuits and trainers bought by the gang, who had stripped them of their own clothes.

Mr Wood was so terrified he later ordered the transfer of &#xA3;600,000 to a British bank. But he cancelled it and the men went to the police.

He said the gang had walkie-talkie radios and spoke of changing a plan to take them to Toxteth in Liverpool.

He denied an allegation by Paul Batty QC there was a VAT scam over the Dubai connection, or that cigarettes were smuggled in returned containers.